Fed officials saw risk Aug decision would send wrong signals
The recovery is finally running out of steam and we are having to face some tough decisions that we have been putting off since we collectively (sort of) chose to bailout the largest banks and backstop real estate. Now that the Federal Stimulus is running out we are seeing all the indicators declining that would point to a recovery. The Fed is going to resume asset purchases including MBS and U.S. Treasuries.
The FOMC mentioned that further shocks will slow growth, any slower than the 1.6% GDP growth will start to go back into recession. The Fed is getting ready to ramp up more credit creation to try and get some positive inflation. This will only work until they stop doing it. We lack income to support the debt in the system so we need to see many more defaults of this bad debt or higher paying jobs need to come back to the U.S. so people can afford their debt load. Until our officials figure out that outsourcing higher paying jobs, dumping cheap goods on the U.S. and running a debt/growth based money system do not work.
Popularity: 1%
Fed chairman says ‘unemployment will remain stubbornly high for several years’
Well you have it from the proverbial horses mouth in Ben Bernanke, our Federal Reserve Chairman. It does not bode well for the U.S. economy when the head of our central bank tells us that we should expect high unemployment for the next several years. On a political note, that is going to make this election cycle and the 2012 presidential election far from certain.
When the economy is going south, it makes it easier for a new candidate to make promises of a better economic environment even if they can not deliver. Bernanke said we will still be between 7-7.5% in 2012 for our percentage of unemployed population. We also need to take account for discouraged workers that will also come back on the rolls and possible push that statistic even higher.
This is also a best case senario, we need to take into account that a double-dip recession is not out of the cards either. I have to tip my hat to Ben for atleast giving us a realistic picture and not telling us our economy through rose colored glasses.
Popularity: 1%
House Democrats agree to put consumer watchdog agency in Federal Reserve
Financial reform is getting more watered down by the day. Derivatives reform has so many exclusions that is basically doesn’t fix anything. Now this is another sign that we are not going to get real financial reform. Putting a consumer protection agency in the Federal Reserve that has a mandate to promote a positive business environment and full employment means that protecting consumers will take backseat.
Fed had the ability to regulate the banks before and they did nothing to stop the predatory practices that were in place before the crisis ie: subprime loans, credit card and debit cards fees. What makes us think they will properly regulate these issues now when they already have a conflicting dual mandate? If we really want to protect consumers, we need a independent non-partisan agency with regulatory authority to handle these issues with that being their sole mandate. We can not think that the Fed is going to put consumers first over having healthy and profitable banks. Currently they are still paying interest on deposits in the Fed instead of forcing that money into the economy as loans and credit. I am not saying we should force the producing of bad loans but we should force the banks to find good loans and business to deploy that money to rebuild their balance-sheets.
Reuters - In a retreat by the House on one of the most contentious parts of historic Wall Street reform legislation, Representative Barney Frank said the House would go along with the Senate’s plan to make the watchdog a part of the U.S. central bank.
House Democrats negotiating final changes to the legislation will also seek to subject payday lenders, check cashers and private student loan providers to the watchdog’s supervision, said a statement from Frank.
House and Senate negotiators are set to resume talks over the wide-ranging reforms on Tuesday.
Popularity: 1%
Fed Should Keep Emergency Lending Secret – Banks Vow Supreme Court Appeal
This was an interesting article about the lawsuit Bloomberg LP filed against the Federal Reserve about the $2 trillion on secret loans they gave and to this day have not given any details. As I have written here before, I believe this information should be public record and if the loans caused a run on some banks, it would be for good reason because they were insolvent at the time and should of been shut down and their assets sold off the the banks that were not in the same position.
Just as Walter Bagehot wrote in his seminal work “Lombard Street, workings of the London Money Market”, bad money will always chase away good money. And bad banking practices will always chase away good banking practices because the bad banks will provide the cheapest credit / money on the most favorable terms so there is not incentive for a borrower to go the more prudent bank that has higher standard.
This is why it is so important to make sure bad banks always go out of business and the prudent banks rise to the top to set the standard for all banking.
NOTE *IMPORTANT PLEASE READ*: Here is the most interesting part of the article and if you were not paying attention or you did not read into what they were saying and more important “not saying“.
Quote: ”The central bank contends that 231 pages of daily reports summarizing lending activity, which were prepared by the Federal Reserve Bank of New York for the Fed Board of Governors in Washington, aren’t covered by the FOIA (Freedom of Information Act). The statute obliges federal agencies to make government documents available to the press and the public.”
Here is plan English the Federal Reserve is asserting they ARE NOT a Government Agency but actually a Private Banking Cartel (definition of cartel) that has a mandate from the U.S. government since 1913 to issue the U.S. Dollar as the sole Lender Tender.
BIG QUESTION?: Do we want to have a private institution have the ability with no oversight be able to have the monopoly to issue our dollar and to be able to help out their banking buddies with any amount of assistance they deemed necessary? Please think about this for a bit before you answer.
If you have any question or want me to back up these claims, I am happy to provide many official references. Please comment below, I am approving any comment, positive and negative. Please back-up any claims so we can have a real discussion. Slander will not be tolerated.
Bloomberg - The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said.
Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs.
The U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help.
Popularity: 1%
SF Fed’s Janet Yellen contender for Federal Reserve’s vice chair
This is most likely the best choice available to the Fed. Janet Yellen is a known quantity and should do a good job at the Vice Chairmanship. Ms. Yellen will have a huge job ahead of her, we have a massive amount of liquidity in the U.S. banking sector that will need to be withdrawn or we will see inflation on the rise when all that cash goes into some asset class.
Reuters, Washington D.C. - San Francisco Federal Reserve Bank President Janet Yellen is a leading contender to be nominated by President Barack Obama as vice chair of the central bank, a senior administration official said on Friday.
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Donald Kohn to Leave Fed at End of Term as Vice Chairman
Who Obama chooses as his replacement will be very important and is to be watched. Vice Chairman Kohn has been an establishment at the Federal Reserve for over four decades. Even though I personally have issue with many of the policies responses in crisis, Donald does have a wealth of knowledge after being near the helm for over 40 years and they will lose some of that wisdom when he steps down at the end of his term. Mr. President choose wisely, the markets will be watching very closely.
Vice Chairman of the Fed
Business Week – Donald Kohn will leave the Federal Reserve at the end of his four-year term as vice chairman after helping Ben S. Bernanke and Alan Greenspan steer the U.S. through recessions and crises.
Popularity: 1%
Fed keeps key interest rates steady despite board member’s disapproval
Interesting they are still keeping interest rates low for an “extended period” even though we are in a recovery. They must know something we don’t. They called the recovery moderate for sometime and that tells me that the earnings will not keep up with where the market is priced so we should see a correction.
LA Times – Washington D.C. - Reporting from Washington – Amid the political rancor over Federal Reserve Chairman Ben S. Bernanke’s bid for a second term, central bank officials encountered some dissension in their first policy-setting meeting of the year, even as they affirmed their pledge to keep interest rates at near zero for “an extended period.”
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